Questions you
must ask BEFORE
signing your
building contract
1
The first things you
should determine are:
Is the builder a licensed
building practitioner
(LBP)?
Is the builder trade
qualified and does s/he
have the skills and
experience to undertake the
proposed project?
Selecting a licensed building practitioner
(LBP) will be the most important thing you do.
Only a LBP can legally complete a restricted
building project. Failing to do so can lead to
penalties for both the homeowner as well as the
builder.
The builder is required to show you his
license. But it would be wise to double check the
builder’s information online at
www.building.govt.nz
Scroll down to Licensing
and click on the “Licensed Building Practitioner
Scheme”. From here you should be able to
“Search the Register” . It is not uncommon to
find fake license holders.
Does a trade association back your
builder? The building industry is fraught with
compliance requirements. Therefore your builder
needs to be regularly informed about regulation
updates.
See Attached Prescribed
Changes to
Building Law in
2015
require builders to provide
their clients with certain
information.
An
honest
builder will
voluntary
supply this
information
for your
benefit.
2
Ask for the PRESCRIBED CHECKLIST
provided by the
Ministry of Business,
Innovation & Employment
About this
checklist
The aim is to provide you with a
checklist and other prescribed
information under the Building Act
2004 before you sign a contract for
the building work if –
a) you request this checklist and the prescribed disclosure information. b) the building work is going to cost
$30 000.00 of more (including GST)
The building contractor is the person or company you have asked to do building work for.
The building contractor may not be an actual builder. The building contractor could be a plumber, an electrician, or any other tradesperson who is doing some building work for you and whom
Conditions for Builders regarding
the Prescribed Checklist
A builder may print this checklist or email the PDF directly to the client A builder is
not allowed
to makeany changes to the checklist – A builder
may not
add a business logo or contact details. If a
main contractor
has hired the builder, the builder does not need to provide this – no matter the value of the building work. A builder may be
fined $500
if he does not provide the checklist when required.3
Request the
Prescribed Disclosure Information
Section 362D, Building Act 2004
Content of the Prescribed
Disclosure Information
Information
about
the builder
Key contact person
(the
person who will manage or
supervise the building work and
who is available to the client to
discuss any aspect of the
building project)
Insurance
policies
Information about any
guarantees
or
warranties
Conditions for Builders regarding the
Prescribed Disclosure Information
a)
A builder may
not change
the
information on the disclosure statement,
but he
may send
other separate
documents at the same time.
b)
A builder may print this
document on his own letterhead
as
long as this does not affect the text in
any way (Watermark are not permitted).
c)
If the builder is not the
main
contractor
he does not need to
provide the information – no matter the
value of the building work.
d)
The builder can be fined $500
for not providing the disclosure
statement when required.
e)
Anyone who knowingly provides
false or misleading information,
or who knowingly leaves out
information they are required to provide
in the disclosure statement, is liable on
conviction to a fine of up to
$20 000
.
See Attached Copy of the Prescribed Disclosure Information
NEDS PROJECTS LTD
+
4
CONTRACTS
What should be in the contract?
For all building work above $30 000 including GST,
the builder must provide a written contract.
What to look for in a contract?
The more detail captured in a contract the better. A contract should also be user friendly, written in an understandable and uncomplicated way. A contract should be fair to both parties.
Get a copy of the contract to study before you sign. Always seek legal advice before you sign.
The following points should be covered in a
contract.
Type of contract (fixed price, cost and margin, small works & alterations etc.)
Name of the builder and the owner
Property detail
Description of the building work – (Consider an appendix that will describe in detail all the building work)
Start date of the building work and a expected completion date. (Construction program)
Contract price
Deposits
Method of payment
Payment schedule
Due dates for payment
Variation rate
Insurance
Guarantee
Contract documents
Signature block
Interpretation of words or descriptions within the contract
+
5
What Independent 3
rd
Party Guarantee
can the
builder provide?
Here are number of features of the
InBuild
scheme
:A guarantee insurance policy underwritten by Lloyds of London and carrying an “A+” rating from Standard and Poor’s.
The widest home guarantee insurance cover available in New Zealand.
Easy application process.
The current most cost effective premiums available in New Zealand.
Automatic insurance acceptance for every new home build or home building alteration.
Easy premium calculation. Set premiums for contracts up to $2,500,000.
No GST payable on premiums.
Minimal policy excesses payable by the property owner.
What does the Guarantee Insurance cover
for the Homeowner/Property Owner?
The InBuild 10 year Residential Guarantee Insurance will provide cover to the Property Owner for
1. Loss of deposits if the builder doesn’t start the building works.
2. The builder starts but doesn’t complete the building works.
3. 10 year cover for the full contract price, for structural defects including weather tightness issue, once the building works have been completed.
4. 10 year cover for the full contract price, for non-structural defects as prescribed by Section 362 if the Building Act, once the building works have been completed. because of the Builder’s failure to carry out the works in accordance with all laws and legal requirements including the Building Act 2004 and the Consumer Guarantees Act 1993.
The Insurance also provides cover for:
Full Contract Sum Insured. The sum insured will be the full contract price meaning full cover is provided.
Alternative Accommodation Expenses. The policy will pay for the property owner’s reasonable accommodation if necessary while the rectification works are carried out.
Builder’ First Party Indemnity cover. The insurance automatically provides an indemnity to the builder after the first 2 years of the 10 year guarantee period meaning the insurer will take over the warranty dispute from the builder, negotiate with property owner and pay the cost to remedy the defect.
6
Insurance
What cover needs to be in place for your project?
Public Liability
All builders and sub-contractors should have public liability insurance, to protect against the cost of damage to other people’s property and to cover the legal defence costs.
Contract Works
Insurance – Project &
Annual
The builder should have this cover in place for a new build home. It covers the loss of, or damage to, property that is being built or altered. It is also known as Builders All Risk or Contractors All Risk insurance.
For alterations and additions the builder should ensure that the building owner arranges the contract works insurance. In failing to do so the home owners risk nullifying their cover.
The two insurance
covers that should be
in place before any
work starts
Public Liability
&
Contract Works
Insurance
NEDS PROJECTS LTD
How many projects are you currently running?
This will give you an indication of the size of the company. The important answer is how much professional attention will your project get. Supervision and best practice must be kept in check to ensure a pleasant building experience. A good builder will always have a quality assurance plan for every project.
Have you ever been declared bankrupt?
A builder who has gone bankrupt in the past may end up doing so again in the future. It is important to ensure your project is
completed and avoid possible delays, if your builder becomes insolvent during construction.
Do they have any past or current building disputes?
Find out whether the builder has had any current or past building disputes with the relevant Building Authority. This will give you an idea about the builder’s general reliability and professionalism as well as the overall quality of his or her work.
7
Back Ground
An
honest builder
should not mind answering these questions. After all, you
are going to
trust
him with a lot of your
money
.
How long have they been in business?
Find out how long the builder you are considering has been in building and
whether the business has always traded under the same name. Builders that have changed names may be a sign of past problems they wish to avoid.
The average life of a building company in New Zealand is less than four years. A builder who has been trading for more than four years, usually, has a good business profile and has been successful to date.
lorem ipsum
www.nedsprojects.co.nz
neil@nedsprojects.co.nz Neil: 027 446 6569
How will you communicate with your builder once
the job starts?
A building project can be one of the most stressful times in person’s life. It can be a difficult time if the project does not progress as expected. You will be in a business relationship with your builder and you must have a clear line of
communication defined before you enter into a contract.
Does the builder have systems in place
to keep you informed?
During the planning and construction of a project, there will be many questions to be answered and decisions to be made. A regular steady flow of information between you and the builder will help ease the process.
Does the builder schedule regular onsite meetings, allowing you to view the work progress and to discuss any construction issues that may arise from time to time?
Does the builder have reporting systems in place to keep you informed, advise you of any issues as they arise or to seek your input on building decisions?
Does the builder have a document process to ensure all correspondence is recorded and acknowledged to eliminate disputes over misunderstandings or incorrectinstructions?
